Practice Areas

“Routed Export Transaction” Would be Removed from Export Regs Under BIS Proposal

Thursday, February 06, 2014

Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security is proposing to remove the term “routed export transaction” from the Export Administration Regulations to better define export transactions in which the foreign buyer assumes responsibility for export licensing. BIS states that this proposal is intended to eliminate confusion arising from the use of two different definitions of this term in the EAR and the Foreign Trade Regulations. Comments on the proposed rule are due no later than April 7.

The EAR define a routed export transaction as one in which the foreign principal party in interest (the buyer) agrees to terms of sale that include taking delivery of items inside the U.S. (via a U.S. agent) and assuming responsibility for transporting those items from the U.S. to a foreign destination. In such transactions, the U.S. principal party in interest may allow the FPPI to expressly assume, in writing, the responsibility to determine license requirements and, if necessary, obtain a BIS license.

However, BIS states, some exporters, freight forwarders and foreign parties have interpreted the definition of “routed export transaction” in the FTR as requiring the USPPI to allow the FPPI to assume responsibility for determining licensing requirements and obtaining license authority in all routed export transactions. This is because the FTR definition includes the FPPI’s agent being given authorization to both facilitate an export and file the required export information through the Automated Export System. There has thus been confusion as to whether to indicate that a transaction is a routed export transaction when the agent is physically transporting the goods out of the U.S. but the FPPI has not assumed export licensing responsibility.

BIS is therefore proposing to replace “routed export transaction” with a new term, “foreign principal party controlled export transaction,” which would be a transaction in which an FPPI that is responsible for the export of items subject to the EAR also assumes the authority and responsibility for licensing requirements. The USPPI would have to delegate this responsibility in writing (e.g., via contract, letter, fax or email) and the FPPI would have to accept it in writing and identify the U.S. agent authorized to act as the exporter. (BIS notes that a single writing could still be used to cover multiple transactions between the same principals.) Unless these criteria are met the USPPI would remain the exporter and thus responsible for export licensing.

Under this rule the USPPI would have to provide the FPPI and its agent, upon their request, with (a) the correct export control classification number or sufficient technical information to determine classification and (b) any information that it knows may affect the determination of license requirements or export authorization. The FPPI, in turn, would have to authorize the USPPI to obtain from its U.S. agent (and direct the agent to provide to the USPPI upon its request) the following information: date of export, port of export, country of ultimate destination, destination port, method of transportation, specific carrier identification, and export authorization (e.g., license number, license exemption or NLR designation).